HP ready to roll on more consumer electronics

HP may have lost its lead in terms of worldwide PC shipments to rival Dell in the first quarter of this year, but the company is planning a comeback that it hopes will not just upset Dell’s PC market, but its consumer electronics play as well.

At least that’s the aim of vice-president of sales and marketing of HP’s Personal Systems Group (PSG), Jim McDonnell, who said the company was steadily working towards regaining the top spot in global PC shipments, and had plans to dive even further into the consumer market.

McDonnell’s comments come after HP announced a new consumer strategy last month, accompanied by the introduction of more than 150 new consumer products, including digital cameras, printers and PCs.

He also hinted that HP could soon be moving into TVs and perhaps expanded music offerings.

According to McDonnell, HP will be “probably” be entering the TV market “very soon” and rolling out products over the next five years.

Although he didn’t give specific details, he said HP TVs would most likely have integrated functionality such as combined DVD players and music playback.

HP may also expand further into music with MP3 players or possibly an online music service.

Although McDonnell would not confirm that HP had any immediate plans to jump into the music market, he recognised that photography and music were the main drivers in the current consumer PC and electronics market.

“Stay tuned,” McDonnell said, when asked if HP was planning to launch any new music products and services.

HP’s expansion into the consumer market comes as the company enters its second year following its merger with Compaq — a marriage that necessitated a major shift in the Personal Systems Group’s product line up and distribution channels.

McDonnell said the company’s dual-brand strategy of aiming HP PCs at the higher-end enterprise market, and Compaq PCs at consumers, was working “fabulously”, pricing issues had been resolved and distributors had been brought further into the fold.

Furthermore, the Personal Systems Group was “on plan” to be profitable this quarter, McDonnell said.

Notebook and tablet sales were up, McDonnell said, and the group was now eyeing a broader consumer market.

Most PC vendors were looking at a wider consumer environment beyond the PC such as providing an array of devices like MP3 players and digital TVs, a PC industry analyst with Gartner, Ranjit Atwal, said.

In fact, Gateway released a Gateway Digital Audio Player last month, while Dell announced a music player and download service last week.

“These vendors are basically trying to get their brands into consumer households, which is one of the advantages Japanese vendors like Sony have,” Atwal said.

To really be successful in the consumer electronics category, HP would have to do some brand building, to be seen as more than a PC maker, Atwal said.

This kind of further product diversification may be necessary, however, given that even if HP overtakes Dell in terms of worldwide PC shipments, the market is not expected to post major profit growth over the next few years.

In April, researcher IDC predicted that the value of worldwide PC shipments would shrink in 2003 by almost 2 per cent to $US169.8 billion.

Furthermore, the researcher predicted that the value of PC shipments would decrease by a compound annual growth rate (CAGR) of 2.8 per cent from 2002 to 2007.

Although worldwide PC shipments are expected to be up 6.9 per cent in 2003, to 145.6 million units, lower prices and heated competition for portable systems would keep revenue down in the short to medium term, IDC said in the April report. This makes a shift to consumer products a smart strategy,
according to IDC.

HP unveiled a new consumer campaign on August 11 with the introduction of an onslaught of new consumer products and services.

In a research note released last month by IDC vice-president of personal technology and services, Randy Giusto, the researcher said “HP is one of the few technology vendors that can pull off something of this magnitude.”

However, Giusto said the proof would be in the products themselves.

For HP, that “proof” may be its ability to go up against vendors like Dell and Gateway in hot markets such as music players and services.

In the meantime, HP has its sights on Dell’s number-one place in worldwide PC shipments. HP managed to take the lead in the fourth-quarter of 2002, but Dell overtook the company in the first and second quarters of this year, according to IDC.

But that fact doesn’t appear likely to deter McDonnell.

“We are the biggest game in town,” he said.

And, according to Gartner’s Atwal, with the merger pains mostly soothed, HP is on strong footing for a comeback.

It remains to be seen whether the addition of more consumer products into the HP line-up gives it that extra punch.

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